The impact of the global slowdown made itself felt with Indian exports dipping for the first time in seven years owing to slackening demand from US and Europe, rupee depreciation and a high base effect.
In dollar terms, exports this October dropped 12.1 per cent to $12.82 billion against a 50.93 per cent jump in the same month last year. Exports stood at $14.58 billion in October 2007.
Analysts cite the decline in exports as an early indicator of sharp deceleration in the Indian economy, with most economists predicting less than 7 per cent growth in GDP in the second half of current fiscal.
In rupee terms, however, the depreciation of the Indian currency by 24 per cent (October to October) helped exports grow 8.2 per cent to touch Rs 23,360 crore. Though a fall in the value of local currency makes exports cheaper for consumers, it erodes earnings in dollar terms.
Imports grew at a much lower rate of 10.6 per cent in October 2008 to touch $23.36 billion.
With exports declining and imports registering modest growth, the trade deficit — the difference between the two — went up 62 per cent to touch $10.53 billion in October 2008.
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In April to October 2008, the trade deficit stood at $73 billion, a 60 per cent increase over $45.63 billion in the same period last year.
“India’s export performance is expected to be lacklustre for the rest of this year and also much of 2009 as consumers and businesses around the world have cut back expenditure,” said Sherman Chan, economist with Moody’s economy.com. “Slowing external orders will also hurt local manufacturers, which will, in turn, curb job creation,” she added.
Meanwhile, non-oil imports in the month expanded just 5.5 per cent to $15.4 billion against $14.6 billion in the year-ago month. Trade experts said non-oil exports were increasing by about 35 per cent for the period between July and September 2008.
“This is a cause for concern as well. Though desegregated data in not available at the moment, the decrease in growth of non-oil imports could be because of lower machinery and capital goods imports,” said Shubhada Rao, chief economist with Yes bank.
| TRADE: THE SLIP IS SHOWING | ||||||||
| In $ terms | In Rs terms | |||||||
| Category (% growth) | Oct 07 | Oct 08 | April-Oct 07-08 | April-Oct 08-09 | Oct 07 | Oct 08 | April-Oct 07-08 | April-Oct 08-09 |
| Exports | 50.93 | -12.1 | 23.33 | 23.7 | 29.27 | 8.2 | 8.98 | 32.0 |
| Imports | 28.18 | 10.6 | 28.89 | 36.2 | 9.76 | 36.2 | 13.45 | 45.6 |
| Source: Department of Commerce and RBI | ||||||||
Oil imports in October grew 22 per cent and stood at about $8 billion against $6.52 billion in the corresponding month of the previous year.
Exporters have already started demanding fiscal sops from the government citing the global financial crisis. They claim difficulty in accessing bank credit and slowing demand from customers in the US and Europe. The government is reportedly preparing a relief package that could include an interest subsidy and an increase in period for export credit.